China's A-share market to see continuous inflows of northbound capital in the long term

BEIJING - China will see a continuous inflow of foreign capital thanks to a lower valuation of the A-share market and solid fundamentals, the China Securities Journal reported, citing an analyst.

Since September, net capital inflows through northbound trading, or money invested from Hong Kong into the Chinese mainland, have reached 65.3 billion yuan ($9.2 billion), hitting a historical high.

China maintains a relatively rapid growth momentum in economy and remains one of the few major economies that keeps the normal monetary policy, said Zhou Longgang, an analyst with Hua Chuang Securities, noting that the country's diverse reform and opening-up policies continue to inject fresh impetus into the economy.

"As China ushers in the high-quality development stage, it will see a long-term trend of foreign capital increasing holdings of A-share stocks," Zhou said.

The influx came after global index provider MSCI raised index weighting for Chinese A-shares from 10 percent to 15 percent, effective from Aug 27.

Another benchmark FTSE Russell strengthened the A-shares' weighting in one of its indices from 5 percent to 15 percent, while the S&P Dow Jones Indices will weigh 1,099 A-shares at 25 percent in an upcoming inclusion.

Banking sector was favored by northbound trading, as seven in 10 shares which have seen the most increased holdings in A-share market since September are banking shares, according to the newspaper.